Israel stocks off; Hapoalim down, Alvarion leaps

RobertDaniel

NEW YORK (MarketWatch) -- Israel stocks closed mixed to lower on Tuesday, with the tech sector's key index eking out a gain but most other benchmarks finishing well into the red.

Investors are focused on the Bank of Israel and looking for a cut in the country's benchmark interest rate, after Sunday's report that the September consumer price index came in at negative 0.9%, a sharper drop than expected.

The Tel Aviv Stock Exchange's benchmark TA-25 Index finished off 0.55% at 866.74, the TA-100 index was down 0.5% at 882.06, and the Tel-Tech index of 15 top technology issues edged higher 0.14% to 374.57.

The most active issue was Bank Hapoalim, down 1.17% at 21.03 shekels ($4.93). Total volume on the exchange was $316 million.

Hapoalim said it would sell some mutual-fund and provident-fund operations to Prizma Group for 605 million shekels, clearing profit of 356 million shekels on the sale. Provident funds are tax-deferred savings accounts.

The cut from the current benchmark, 5.5%, might be a quarter-point or even half a point, Excellence Nessuah said in a note.

But in making that call, Bank of Israel Gov. Stanley Fischer "will no doubt consider the potential longer-term effects" of the summer war with the Lebanese group Hezbollah, "and the political dangers of a shaky government facing a tough debate over the budget," the firm's analysts said.

Fischer might move conservatively since he does not want to cut rates too sharply and then be forced to double back with an increase, the firm said.

A standout among tech stocks was Alvarion,
ALVR, +0.00%
the producer of wireless broadband networks, up 4.78% at 32.64 shekels. The shares, traded in New York, climbed 6.15% on Monday.

Koor Industries,
KOR, +0.00%
the holding company with interests in telecom equipment, agrichemicals, and defense contracting, fell 1.51% to 228.2. Merrill Lynch, via analyst Haim Israel, terminated coverage of Koor, saying that after Israel's IDB group took control, the company's role within the new owners' operations is unclear.

IDB Holdings gained 0.57% to 105.8 shekels.

Teva Pharmaceutical
TEVA, +1.09%
was off less than 0.1% at 151.6 shekels. Hambrecht & Quist called the company a top trading idea, saying it "should have a blowout quarter with all the impact of generic Zocor and Zoloft."

And while investors "may be fretting about 2007 growth, we suggest investors consider Teva's cash flows and how this best-of-breed performer will continue to expand its global dominance in generics with the U.S., now officially at 300 million (population), representing less than 5% of the target market."

Delek Group lost 1.5% to 708.5 shekels. The company's Delek U.S. Holdings
DK, -0.37%
subsidiary was maintained outperform at William Blair, which trimmed its third-quarter earnings estimate for the gasoline retailer and refiner by a dime to 23 cents a share. But it said Delek U.S. "has myriad opportunities to improve profitability in both refining and retail."

Israel Chemicals, the maker of fertilizer, fell 1% to 21.74. Deutsche Bank on Monday affirmed its buy rating and raised its price target on the company to 26 shekels from 24. Merrill Lynch, in a note issued Monday, called Israel Chemicals its top domestic pick.

Within the TA-100, Jerusalem Economic Corp. rose 0.37% to 51.42. The company said negotiations to buy a property in Canada had ended.

The TA Real Estate index lost 0.93% to 616.11. Leading the drop were Delek Real Estate, down 4.56% to 34.32, and Elbit Medical Imaging,
EMITF, -1.26%
which also has medical-scanning interests, down 3.17% to 122 shekels. Africa Israel Investments rose 0.15% to 268.4 shekels.

The Tel Aviv Financials Index dropped 0.76% to 1148.67. Of the index's 15 members, only Bank Mizrachi Tefahot managed a gain, 0.18% to 27.95 shekels. Among the rest of the banks, Leumi fell 1.09% to 17.18, Discount shed 0.87% to 8.55, Union Bank declined 0.97% to 20.51, and First International Issue 5 lost 1.25% to 56.8.

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